Take this quote from a 2003 study by Robert Dietz, professor of economics at Ohio State University, titled “The Social Consequences of Home Ownership” [.PDF, 180kb]: “You are happier and more satisfied with your life[,] your children are better educated and less likely to get into trouble[,] your daughters are less likely to become pregnant as teenagers[,] you vote more often and are more active in your community[,] you are more likely to recycle and less likely to get mugged.” (I added in some comma’s and the emphasis was mine) Doesn’t that add a little wrinkle into the rent vs. buy question?

Essentially, what it comes down to is that homeowners feel more vested in a community than renters do. I didn’t really care who my neighbors were when I rented because I was probably moving in a year, not so with my neighbors now. I’m more likely to be active in my community now because I know I’ll be here for a while. I’ll be more active in the political process because those decisions will now have lasting effects on my life and my finances.

On a personal note, I know of friends who own row homes in the city who have gone to town hearings on construction permits for roof decks. A rule is that if you construct a deck, it can’t block the “view” of your neighbors and anyone can challenge your permit for that reason. If you rented, you don’t care if a deck blocks your view. If you own it, you certainly do care because you don’t want to see another deck in the way of your view of the cityscape, you want to see the cityscape!

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Huh. I’d really like to see Freakonomics spin on this….aside from your point about home ownship results in a more vested interest in community (which I 100% agree with) I’m not sure I buy the implied causality in the article. Correlation, maybe…but “consequence”? Not buying it all (some…just not all)

While being a home owner myself, I happen to think a large part of the equation is also people’s perceptions of owning vs. renting. You’re viewed as less successful when you rent. It’s the “American Dream” to own a home.

I was about to disagree with the finding by saying something about San Francisco, since 65% of the population are renters here, but then I realized that they already acknowledge San Francisco doesn’t fit into their study. I can’t imaging renter that are playing 3k+ in rent every month would suffer from those consequences that the study implies. I know plenty of people that moved away to buy houses then ended up coming back to San Francisco to rent. Considering that rent are around 1/2 to 1/3 of the monthly mortgage payment, I can’t imagine renter under as much stress as home owner. Please don’t tell me to move into a bad neighborhood just so I can buy a house. The chance of getting kill out weight any benefit of owning a house in a high crime area.

I agree with Caitlin, and it was my first thought after reading the PDF earlier today. There really is a huge difference — not merely a nuance — between correlation and causality, and a lot of “false knowledge” of the world results when people misinterpret research. It’s easy to prove a correlation — merely an observation of two things. It’s much more difficult to prove that one thing causes another. Even in many controlled experiments, researchers still can’t determine if A causes B or if B causes A.

If someone gives advice to other people based on human behavior, it is absolutely necessary for them to understand this concept.

Instead of saying owning a home results in better money management and higher net worth, you have to consider the possibility that there is something else — the x factor — that causes both the higher probability of owning a home AND the higher probability of a higher net worth.

Some of the studies cited in the PDF measured causality and others just correlation.

Hate to be so academic, but you have to be if you want to make accurate statements about behavior. More info.

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